September 2018 Pacific Northwest Market Watch

CLOSED SALES ARE DOWN
Most of the general public in the greater Pacific Northwest is now aware that residential real estate inventory is up. I mentioned that in last months post. This month I want to talk about how sales are down.

Attached is a chart of all closed sales since January 2000 in the King, Snohomish, Pierce and Kitsap counties. These figures include both SFR and condo.

If you study 2018, and compare it back to 2017, you can see that closed sales have been down in every month of the year. That being said, from January through May- that number was a modest drop of 5% or below. May 2018 was the peak of the market. After the peak in April and May, sales dropped in a major way in June- where only 8,052 units moved, as compared to June 2017, when 9,042 units changed hands. This was a drop of 10.9% year over year. That trend continued in July. July 2018 closed sales numbers were down 10.6% from the year prior July.

August saw a drastic shift. In August 2018, sales were down to 6,893 closed units in the 4-county area, as compared to 8,637 in August of 2017. This was a 20.2% drop year over year.

Could September see sales drop down to 5800 units? If so, that would be the lowest number of September sales since 2011, when the market was on the last legs of a decline.

INVENTORY IS UP
Inventory in King County is climbing. According to the NWMLS, there were 5,803 Active units at the end of August. Measured in terms of months, inventory in King County was sitting at 1.92 months. In August of 2017, that number was 0.93 months. When I do unofficial checks on inventory myself, I noted inventory in King County after the first week of September was at 2.13 months. Inventory at the halfway mark of September is now at 2.3 months. I have Active inventory in King County right now at around 6,400 units- which is about a 10% increase in the absolute number of homes available in King County as compared to two weeks ago.

Now, some of that is pent up from August, sellers waiting for August to pass and people to come home from vacation before listing their property- but I am curious to see where inventory lands both in the number of absolute units and measured in terms of months inventory, by the end of September. Something to watch for sure.

PEOPLE ARE STILL BUYING
In this market shift, it’s fascinating to me how investors and owner occupied buyers are still buying. People need a place to live, and people need to reposition themselves as they move through the stages of life. A new job, a new baby, or any other life stage or life change- life moves on. Buyers are still looking for their own unique situation, in proximity to their place of employment, family, good schools, and want to make a sound investment. Buyers are also boosted with a bit more affordability in pricing, as they are starting to have a more equal playing field when negotiating with sellers, and they are not as fatigued with multiple offer situations. Someone I know just bought up in Lake Stevens, and another person went under contract in Kirkland- the right house for their situation. Both parties know the market has shifted- but they took this window of opportunity to make their move.

On the investor side, I have seen dozens of good deals being done in the last 30 days by savvy investors. The overheating of the market in early 2018 did not allow the best investors to really show their talents. Now, with more people on the sidelines, these investors are able to negotiate and secure better deals than they were angling for earlier in 2018. This goes for both flip investors and income investors.

ABOUT ME: Davis Hsu is the Director of Real Estate Valuation for Veristone Capital. Veristone Capital is private lender focusing on residential, land and commercial real estate in the Pacific Northwest region and beyond. Veristone’s core expertise involves lending in bridge situations, fix and flip products, land acquisition financing, and new construction loans.